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Trade

The EU-Mercosur Agreement is an opportunity, not a threat

Unsplash Creative 0.0: Photo by Ian Taylor

This agreement provides the tools to oppose China in the region...

The agreement between the European Union and Mercosur is being called into question - under false pretexts. It is time to realise what is really at stake.

The trade agreement between the European Union (EU) and Mercosur (an economic community comprising several South American countries) is criticised - or even practically dead to some. This was France's intention from the outset: more protectionism, less free trade.

It all started with the fires in the Amazon, in Brazil. According to the forest and environmental expert Emmanuel Macron:

"Our house is burning. Literally. The Amazon, the lung of our planet that produces 20% of our oxygen, is on fire. It is an international crisis. Members of the G7, meet in two days' time to talk about this emergency. #ActForTheAmazon"

With such calls, the right thing to do is to put things into perspective. We know that the number of fires in Brazil this year is higher than last year, but it is also about the same as in 2016 and lower than in 2002, 2003, 2004, 2005, 2006, 2007, 2010 and 2012.

Although the number of fires in 2019 is indeed 80% higher than in 2018 - a figure that has been widely reported recently - it is only 7% higher than the average for the last ten years. Moreover, most of the fires are currently occurring on already deforested land in the Amazon.

The popular myth is that the Amazon is "the lung of the Earth", producing "20% of the world's oxygen". At least that's what Emmanuel Macron's tweet says. In reality, both are inaccurate... and not just because your lungs don't produce oxygen. Yet this figure will continue to circulate as long as there are reports to be delivered; the Associated Press agency itself has propagated it - it had to withdraw it afterwards.

According to the Scientific American :

"In fact, almost all of the Earth's breathable oxygen comes from the oceans, and there is enough to last for millions of years. There are many reasons to be appalled by this year's Amazon fires, but depleting the Earth's oxygen supply is not one of them."

So no, you won't suffocate because of the fires in the Amazon.

Ireland and France are nevertheless proposing to terminate the agreement with Mercosur for environmental reasons. Unfortunately for them, no environmentalist pretext can hide their real motives: to defend the protectionist interests of Irish and French farmers, who have complained about increased competition from countries like Argentina.

This agreement is of great geopolitical importance; it is a vital sign against protectionism. If ratified, this agreement with Mercosur would establish the largest free trade area that the EU has ever created, covering a population of over 780 million inhabitants, and would consolidate the close political, economic and cultural links between the two areas.

The agreement eliminates tariffs on 93% of exports to the EU and grants 'preferential treatment' to the remaining 7%. In addition, it will eventually eliminate customs duties on 91% of the goods that EU companies export to Mercosur. The number of formal complaints to the WTO in 2018 was 122% higher than in 2009. In 2018, the EU was the second biggest defender of WTO complaints, almost twice as many as China.

Then there's the importance of China.

This country is not mentioned at random. It is crucial to understand the Chinese influence in South America. Since 2005, the China Development Bank and the China Export-Import Bank have granted more than $141bn in loans to countries and companies belonging to Latin American and Caribbean states.

In Latin America and elsewhere in the world, Chinese loans are seen as both profit-seeking and a form of diplomacy. The Development Bank focuses on eight areas: electricity, road construction, railways, oil, coal, telecommunications, agriculture and public services. With this agreement, it becomes possible to counter Chinese influence. France and Ireland must stop opposing it and work on a joint agreement in Europe.

Giving consumers more choice, guaranteeing more free trade for producers on both sides and defending geopolitical interests through trade policy: all this should be obvious. Unfortunately, it seems that nothing is obvious any more, at least for the current political class.

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